TMI Blog2013 (11) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... see, cannot be established on assumptions and presumptions - Such a charge has to be based on concrete and tangible evidence - Relying upon Oudh Sugar Mills Ltd. v. Union of India [1962 (3) TMI 75 - SUPREME COURT OF INDIA ] - demand of duty cannot be raised on the strength of assumptions and presumptions - There should be sufficient evidence of the removal of the goods alleged to have been manufactured and cleared without payment of duty - The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. Duty demand on documents seized from premises – Held that:- Mere admission of a document in evidence does not amount to its proof - The demand which has been confirmed against Nova by the order is not based on evidence which, as the Tribunal has repeatedly emphasized in cases of clandestine manufacture and clearance, would justify a finding against the appellant - Inferential or conjectural conclusions cannot be arrived at in such cases as has been done in the present demand, merely based on what GSL did with the POY allegedly sold to them by Nova - there is no tangible evidence produced by the department to establish t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent: Shri P.V.R. Ramanan, Special Counsel JUDGEMENT Per: M.V. Ravindran These appeals are directed against the Order-in-Original No:07/Commissioner/RKS/AHD-II/2009 dated 24.3.09 passed by the Commissioner of Central Excise, Ahmedabad-II. As the issues involved in the present appeals are interconnected and arise out of the same impugned order dated 24.3.09 passed by the Commissioner, all the appeals are being disposed by a common order. 2. The brief facts which are necessary for the disposal of the appeal may be stated thus: The main appellant (hereafter referred to as Nova ), against whom the duty has been confirmed, is registered with the central excise department and is engaged in the manufacture of Partially Oriented Yarn (POY), Fully Drawn Yarn (FDY) and Draw Twisted Yarn (DTY). The impugned order, which has been challenged in the present appeals, confirms the duty demands against Nova under the following heads: (i) ₹ 56,25,945/- leviable on 2,75,197.31 kgs of POY of 115/68 Denier, clandestinely manufactured and cleared by Nova to Gupta Synthetics Ltd (GSL), who in turn had processed the said POY on their Draw Twisting Machine, liable to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded. These statements are also relied upon in the Show Cause Notice. The nature and contents of documents seized from the premises of GSL have been described in the Show Cause Notice in the following manner: A-19 is a Daily Report Book, maintained by the V.N Parab, which contains the details about daily opening stock of POY, consumption quantities, quantities of waste of POY generated, working hours of machine etc. A-20 is a file of loose papers. Page No.13 of said loose papers shows number of boxes, the weight of the yarn, the denier no, merge number, crill no and date etc. A-21 is a duplicate note book maintained by V.N Parab. The entries referred to in the said note book are A.P Total , A.P Production total and A.P Production day . The said Note book has been maintained for the purpose of reporting the daily progress made in achieving the production targets, till the end of the month on cumulative basis. A-22 is a Note Book (91 pages) maintained by V.N Parab, which contains the details of Crill No and number of Crill Positions etc. The document marked as A-23 is a note book, containing 83 pages, which are serially numbered. The entries contained therein are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93,890.96 kgs of POY of 115/68 denier has been, according to the Show Cause Notice, clandestinely cleared by Nova to GSL during the period 1.6.2001 to 16.2.2002. Duty demand of ₹ 19,25,438/- has been raised on Nova for the said period. Annexure B-2, is prepared on the basis of the seized document marked as A-22. For the period 20.02.2002 to 30.06.2002, duty amount of ₹ 23,01,934/- has been demanded on the basis of document marked as A-22. Annexure B-3 is prepared on the basis of seized documents marked as A-19 to A-21. This Annexure, as per the Show Cause Notice, shows consumption of 69510.73 kgs of POY of 115/68 denier and manufacture of 65545.570 kgs of DTY of 70/68 denier during the period 1.7.2002 to 15.8.2002 by GSL. The seized quantity of 69510.73 kgs of POY of 115/68 denier has been cleared without payment of duty by Nova. A duty demand of ₹ 14,25,570/- has been demanded on the said quantity of POY. Thus a total of duty of ₹ 56,52,945/- has been demanded for the period starting from 1.6.2001 to 15.8.2002 from Nova. II. The facts narrated in the Show Cause Notice as regards the second demand of ₹ 3,93,20,685/- are as under: Diaries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts narrated in the Show Cause Notice as regards the third demand of ₹ 2,82,64,613/- are as under: The duty has been demanded under this category on the basis of the records resumed during the search. It is stated that substantial quantity of degraded polyester chips and waste of polymer was cleared by Nova, without giving full address of the buyers, on the invoices, which created a doubt about the genuineness of the said sales effected by Nova. The evidences relied upon in the Show Cause Notice are the following : (i) RTO s report indicates that the transportation as shown by Nova with regard to their clearances refer to fictitious transport vehicles. These vehicles were not capable of carrying goods as claimed by Nova. (ii) Nova had failed to provide addresses of buyers, freight payment details, copies of purchase orders, or any other documents, to verify the genuineness of sale transactions. (iii) Ashok Chiripals diaries do not mention about any clearance of degraded chips or waste of polymers. (iv) Seized documents (File No:A-240, A-249 and A-291) from the premises of Nova contained certain torn pages, showing stock of chips, PTA, MEG,LDO,FO etc. which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as mentioned in the Delivery Challans. (iv) Enquiries regarding types of vehicles used for transportation of yarn to EOUs shows that large quantity of yarn has been cleared by Nova on vehicles incapable of carrying goods. (v) Enquiries from the Central Excise Officers of Malegaon and Dhule make it clear they never verified receipt of duty free goods sent by Nova to EOUs under their charge. CBEC Circular 88/99-Cus dated 2.12.98 absolves the Central Excise Officers from physical verification of goods before issuance of certificates. It is alleged on the basis of the aforesaid evidences that Nova in collusion, with EOUs, procured CT-3 certificates from them and cleared the excisable goods against AR-3As but diverted the goods in the open market. The goods are alleged to have not reached the said EOUs. EOUs have never used the goods received from Nova for manufacturing export goods. EOUs, without receipt of duty free inputs, submitted the documents only to the jurisdictional Central Excise Officers and got the re-warehousing certificates issued which were sent to Nova. As duty was evaded by collusion between Nova and the aforesaid EOUs, the duty is liable to be recovered join ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of Directors (both of GSL as well as Nova) do not admit the correctness of the documents. In fact, it is stated by the Director of GSL that VN Parab was not a person authorized to keep records relating to production since he was Supervisor in Machines Section. Further, even as per the Show Cause Notice, V.N Parab worked with GSL for 4 years till October 2002. V.N Parab kept records during the period 1.7.2002-15.8.2002 (A/19). The period covered by the SCN is from March 2002 to 15.8.2002. There is nothing forthcoming from him (or in the Show Cause Notice) as to whether any such records had been kept by GSL for the remaining period covered by the SCN. The demand is, however, for the entire period covered by the SCN mainly on the basis of inferences re. production referred to in A/19. Such an inference based on averages is, according to Nova, legally impermissible. It is significant that V.N Parab was, while giving his statements, asked to explain A/19. It was pointed out by Nova that not a single question seeking his clarification regarding A/21 was put to V.N Parab. 8. As regards the second demand of ₹ 3,93,20,685, Nova submitted, inter alia, that the demand is based pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein, whether they received the goods or not. HK Jha, Manager, Quantity Control, in his statement has stated that 10 to 26% of the quantity cleared were of degraded chips. There is no correlation between the details in the invoices and the figures contained in A/296 and A/298, claimed to have been prepared by Ashok Chiripal. Chiripal has nowhere stated that the 2 diaries showed clearances of POY only. No detail has been given as to how the department has been able to trace out MP Patel, which according to them was one of the customers of Nova. The request for his cross examination was also been denied. Ashok Chiripal has nowhere stated that the Polymer Chips were, in fact, good quality polyester chips. There is no evidence of consumption of polyester chips or polyester waste or actual production of 13,96,923 kgs of POY. There is no evidence of any customer, to whom Nova has sold POY. In the light of these facts and the absence of any evidence, it was the submission of Nova that the demand was not sustainable. 10. As regards the fourth demand of ₹ 10,07,06,623, Nova had made detailed submissions before the adjudicating authority . They had submitted, inter alia, that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iles Pvt Ltd, Prime Furnishing Pvt Ltd and Kansal Texo-Tube Pvt Ltd (100% EOUs), it was submitted before the adjudicating authority that the activity of in-bond manufacture out of imported/indigenous duty free raw materials was carried out strictly after following the requirements of statutory provisions, including filing of declarations, maintenance of records etc. They had received the goods against CT-3 certificates and under cover of statutory invoices and statutorily prescribed AR-3As. The fact about receipt of each individual consignment was duly notified to the Central Excise Range officer by filing D-3 declarations within 24 hours of receipt of goods in their premises. 14. On behalf of Balaji Exports, it was, inter alia, submitted before the adjudicating authority, that due intimation was given to the Range Office regarding receipt of goods. AR-3As received from Nova were produced before the department and the same is on record of the department. By way of additional submissions dated 23.1.2008, they had pointed out further discrepancies in the Show Cause Notice. 15. On behalf of Arya Fibres Pvt. Ltd, it was, inter alia, submitted before the adjudicating authority tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excise, Ahmedabad-II. (ii) Denial of cross-examination: Novas letter dated 19.9.08, does not contain any specific reason(s) justifying the cross-examination. The reasons for not allowing cross-examination had been communicated to Nova vide letter dated 10.10.2008, issued by the office of adjudicating authority. (iii) Non supply of documents: Nova in their submissions have not pointed out as to which of the documents relied upon in the Show Cause Notice has not been supplied to them. 21. On merits, the adjudicating authority has dealt with each demand separately. As regards the first demand in the Show Cause Notice, the adjudicating authority has confirmed duty demand of ₹ 56,25,945/- under the proviso to sub-section (1) of Section 11A of the Act and has held that Nova has clandestinely manufactured and cleared POY of 115/68 denier, to GSL, who in turn had processed the said POY on the Draw twisting machine. The adjudicating authority has proceeded to confirm the duty demand on the reasoning that it could be inferred from Mohan Lal Guptas statement that on an average 1560 Kgs of DTY was manufactured by GSL per day. Purchase documents produced by GSL show only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they had not cleared any quantity of degraded Polyester Chips or waste of Polymers. In order to maintain input output ratio, Nova had issued bogus invoices purportedly showing clearance of degraded chips. The quantity of degraded polyester chips and waste of polymers was actually consumed in the manufacture of POY, which in turn was clandestinely cleared without payment of duty. The findings of the adjudicating authority are that, since the vehicles indicated in the 9 invoices, as per the report of RTO, were incapable of carrying the goods, the only logical conclusion would be that goods shown to have been transported were not in fact transported from the factory of Nova. Clearances of degraded chips have been shown to bogus customers for the purpose of regularizing Novas account. Since Ashok Chiripal has stated that the quantities mentioned in his diaries were good quality chips, the adjudicating authority came to the conclusion that Nova did not clear degraded chips. 24. As regards the fourth and last demand, the adjudicating authority has refrained from confirming the duty demand against the EOUs and has confirmed the total duty demand of ₹ 9,77,62,573/- only against N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Nova by suppressing the quantity of Polyester Chips? (iv) Whether the duty demand of ₹ 2,82,64,613/- has been rightly confirmed against Nova alleging evasion of duty on POY by mis-declaring the same as degraded Polyester Chips/Polymer Waste? (v) Whether the duty demand of ₹ 9,77,62,573/-/- has been rightly confirmed against Nova, alleging diversion of EOU clearances effected by them? 29. Apart from the aforesaid issues, there are some legal issues which we would be considering while dealing with the factual aspects of the case. On the preliminary issue of violation of principles of natural justice, we find that the Adjudicating Authority has rejected the request for cross-examination on the reasoning that no justifiable and tangible reasons have been furnished by Nova while requesting for cross examination. In this regard, the ld. Senior Advocate has referred to the communications made by Nova requesting for cross examination of the witnesses. 30. As early as on 28.07.2006, Nova requested for cross examination of witnesses to examine the reliability and veracity of the evidences brought on record. By subsequent letter dated 09.09.2008, Nova had raised the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence under the provisions of the Act which has been corroborated by documentary evidence and, therefore, no cross examination can be acceded to. In respect of others, it is held that, they being machine operators their cross examination is not relevant. Cross examination has no relevance in the face of evidence available on record and the request was accordingly rejected. The statements of representatives of EOUs have been corroborated by other documentary evidence and are admissible as evidence under the law and cross examination of such persons cannot be permitted. To similar effect is the reason for rejection of cross examination in the case of transporters, since their statements have been recorded under Section 14 of the Act. The decisions cited in the submission made by Nova have been held to be not applicable since the facts and circumstances of those cases did not appear to be relevant to the facts of the present case. However, there is no discussion of any case referred to by Nova or to the facts and circumstances of those cases or even the dicta laid down in those decisions. On the contrary, the order relies upon the decision in the case of Collector v D Bhoormul (1983) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled and an opportunity accorded to the opposite party who challenges this fact. In Swadeshi Polytex Ltd v CCE, Meerut 2000 (122) ELT 641 (SC), it was held that if the Adjudicating Authority intends to rely upon the statement of any such persons, the Adjudicating Authority should give an opportunity of cross examination to the appellant. In Lakshman Exports Ltd v CCE, 2002 (143) ELT 21 (SC), the Honble Supreme Court had held that where an assessee had specifically asked to be allowed to cross examine the representatives of two concerns to establish that goods in question had been accounted for in their books of accounts and the appropriate amount of Central Excise duty had been paid, the logic of such request is clear from what is stated therein. In Basudev Garg v CC, New Delhi, 2013 (294) ELT 353, the Hon ble Delhi High Court relied upon the earlier decision in J K Cigarettes v CCE, 2011 (22) STR 225 (Del.), and held that, insofar as general propositions are concerned, there can be no denying that when any statement is used against the assessee, an opportunity of cross examining the persons who made those statements ought to be given to the assessee. Reliance is plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mandatory procedure to be adopted in all cases. The request should not be dismissed arbitrarily or without exercising its discretion in the facts of each case. The Adjudicating Authority may refuse cross examination for justifiable reasons. According to the ld. Senior Advocate, these judgements relied upon in the letter of 10.10.2008 are not, therefore, decisions which can justify the order passed in the present case rejecting Novas request for cross examination of the witnesses on whose statements reliance has been placed. We agree with the aforesaid submissions of the ld. Senior Advocate that the decisions cited by the adjudicating authority on this aspect are clearly distinguishable. They do not lay down the proposition that cross-examination is not a right, but only that it would depend on the facts of each case. During the hearing held before this Tribunal, and while replying to the submissions on this issue made before us by the ld. Senior Advocate, the learned Special Counsel for the department made reference to the recent decision of the Hon ble Supreme Court in Telestar Travels Pvt Ltd v Special Director Enforcement, 2013 (289) ELT 3 (SC) as supporting the order reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross examination. Such being the case, refusal of the Adjudicating Authority to permit cross examination of the witnesses producing the document, cannot even on the principles of Evidence Act, be found fault with. It was, therefore, held that no prejudice was caused to the appellant nor was demonstrated by the appellant before the Hon ble Supreme Court or before the Courts below. We agree with the submissions of the ld.Senior Advocate that the said decision of the Hon ble Supreme Court does not support the proposition that rejection of request for cross examination of witnesses whose statements have been relied upon, does not amount to violation of principles of natural justice. On the other hand, the observations extracted above demonstrate to the contrary. As far as the facts before the Hon ble Supreme Court were concerned, production of the documents being in the nature of production of documents under Section 139 of the Evidence Act, their cross examination was prohibited by the said Section itself. In the present case, witnesses who have given the statements are not persons who were asked to produce documents under Section 139 of the Evidence Act. Their statements were record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue had no objection to argue the case of the Revenue fully on merits and justify the correctness of the impugned order. We, therefore, proceeded to hear the matter fully and examine the entire case on merits as well. 37. It is the submission of the ld. Senior Advocate that the impugned order is, per se, apart from being violative of principles of natural justice, on merits, in the facts of the present case, contrary to a long line of decisions of Courts and of this Tribunal in the matter of how clandestine manufacture and clearance of goods has to be established by Revenue. He submits that the law, in this regard, has been repeatedly laid down by this Tribunal in a long line of cases, some which have also been affirmed by different High Courts, and one of them, by the Hon ble Supreme Court.. The issue of clandestine manufacture and clearance of goods arises, according to the ld.Senior Advocate, in the case of first three demands confirmed in the impugned order and has some relevance to the fourth demand as well. He, therefore, submitted that we may hear the submissions of both the parties on the said issue and, thereafter, apply the principles to facts relating to each dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintained by the Foreman were not corroborated by any other evidence. Several decisions of this Tribunal were cited in support of the contentions of the appellant [CCE, Meerut v Moon Beverages Ltd., 2002 (150) ELT 976, Kabra Enterprises others v CCE, 1999 (109) ELT 571, Kothari Products Ltd and others v CCE, Kanpur, 2003 (159) ELT 1187, CCE v Raman Ispat, 2000 (121) ELT 46]. This Tribunal cited and followed the earlier decision in the Moon Beverages Ltd case (supra) to the following effect: it is well settled that the charge of clandestine removal cannot be established on the basis of one single factor which in this case, is the figures of sales reflected in the computerised sheets recovered by the Department from M/s. PEL. Without obtaining evidence such as evidence of other inputs required for manufacture of finished product namely Sugar, Carbon-di-Oxide being purchased and utilised in the manufacture of the final product during the period in dispute is required. There is no such evidence in the present case. There is also no evidence regarding higher electricity consumption. There is also no evidence of receipt of extra sale of goods clandestinely manufactured or removed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) In T.G.L Poshak Corp. v CCE, 2002 (140) ELT 187, this Tribunal considered the issue as to whether the demands can be confirmed on the basis of recovery of exercise Note Books and certain balance sheets maintained by the assessee and in the absence of any corroborative evidence. In fact, in a tabulated form this Tribunal dealt with the judgements which were referred to, to support the plea that demands cannot be confirmed which contained the reason for this Tribunal coming to the conclusion that, in the absence of any corroborative evidence, of a tangible nature, clandestine removal cannot be established. This Tribunal relied on the tabulated list of citations furnished by the Counsel that unless there is clinching evidence on the nature of purchase of raw material, use of electricity, sale and mode of flow back of funds, demands cannot be confirmed solely on the basis of Note Books maintained by some workers. (vi) In Hilton Tobacco v CCE, 2005 (178) ELT 378, certain private documents maintained in the factory were seized under which it appeared that the appellant had not accounted for raw material procured by him. This Tribunal held that a inference cannot be based on certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account. The request for cross examination of some of the persons whose statements were relied upon was rejected by the Adjudicating Authority only on the ground that the assessee had not given any reason and justification for their cross examination. This Tribunal held that this approach of the Adjudicating Authority is inconsistent with the law of evidence. On a careful perusal of the entire records of the case, the Tribunal found that there was nothing on record as to unrecorded purchases or consumption of other various raw materials in the manufacture of finished products. There was no statement of suppliers of raw material, except in respect of one of the raw materials. His cross examination has also been rejected. In the absence of any other tangible evidence to show that other major raw materials had been procured without recording the same in books of accounts, this Tribunal did not accept the contention of the revenue that finished goods had been clandestinely manufactured and cleared. After referring to several earlier decisions of the Tribunal on the subject, the Tribunal held that the charge of clandestine manufacture was not established. This decision was taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be raised on the strength of assumptions and presumptions. There should be sufficient evidence of the removal of the goods alleged to have been manufactured and cleared without payment of duty. The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. This very principle of law had been applied by the Tribunal in a number of cases and out of those, few are, Amba Cement and Chemicals v. CCE - 2000 (115) E.L.T. 502 (Tribunal) = 2000 (90) ECR 265, Gurpreet Rubber Industries v. CCE - 1996 (82) E.L.T. 347 and Madhu Foods Products v. CCE - 1995 (76) E.L.T. 197. 10. For want of any legal, tangible and concrete evidence, the duty demand of ₹ 4,64,56,058/- as confirmed by the learned Commissioner along with equal amount of penalty and interest, against the company appellant No. 1, cannot be legally sustained and is set aside. Being aggrieved by the order, the revenue carried it in appeal to the Hon ble Supreme Court and the same was dismissed as reported in 2003 (157) ELT A315 (SC). The ratio of the decision clearly indicated that in the case of clandestine removal it was for the revenue to substantiate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... everal criteria which could go to establish the cases of clandestine manufacture and clearance. Where such ingredients exist, a contention that a case need not be proved with mathematical precision may become relevant. The decision in D. Bhoormull would not, therefore, be of help to the revenue in cases where there is no evidence at all satisfying the tests laid down by this Tribunal in the long line of cases referred to earlier. In support of the submission regarding preponderance of probability being tested to determine the issue the learned Special Counsel had referred to 3 decisions. Gulabchand Silk Mills Pvt Ltd v CCE, 2005 (184) ELT 263, Umiya Chem v CCE, 2008 (7) LCX 0602 2009 (239) ELT 571 and Ureka Polymers v CCE, 2001 (127) ELT 618. These decisions, according to the ld. Senior Advocate, are not contrary to the decisions cited by him for Nova. In the case of Gulabchand v CCE, the vehicle was intercepted carrying non duty paid goods. Unaccounted duty paid goods were found in the dealers premises and they gave statements to the effect that the goods were supplied with bills and without bills. This was not a case where there was no evidence of clandestine manufacture and clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacture or even of its Directors/partners who are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside in that case by this Tribunal. 42. We may now proceed to deals with the four demands of duty in the present case: I. The first duty demand of ₹ 56,52,945/- is mainly based on documents seized from the premises of GSL i.e. A-19, A-20, A-21, A-22 and A-23. Other than these documents, the evidence is V N Parabs statement and Mohan Bhai Guptas statement. The seized documents as per the stand of the Revenue are note books maintained by Parab. The allegation with regard to the present demand is that Nova had clandestinely cleared POY to GSL. According to the Revenue the entries made in A-19, A-20, A-21, A-22 and A-23 pertain to clandestine procurement of POY of 115/68 denier from Nova and clandestine production of DTY by GSL by processing the same. The ld. Senior Advocate has submitted that the entries made therein by V N Parab are totally vague, in as much as there is nothing therein to show that they pertains to clandestine procurement of POY and clandestine clearance of DTY. The learned Senior Advocate has also pointed out that there are discrepancies in the seized documents relied upon by the Revenue. He has further pointed out that A-21 does not even refer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is proved against such person, the Court shall presume the truth of the contents of such document. Therefore, the truth of contents of such documents can be presumed only where the person from whose custody or control the document has been seized is being proceeded at all, whether solely or jointly tried with some other person. In the present case, V.N Parab has not been proceeded against solely or jointly with some other person. In the present case, admittedly the documents were recovered from the premises of GSL. The said documents were produced by Parab who is no way connected with Nova. No presumption could therefore be drawn against Nova. There has, therefore, to be independent corroboration of the facts alleged in the Show Cause Notice, apart from documents. The learned Senior Advocate has relied upon the decision of the Hon ble Supreme Court in the case of State of Kerala v M M Mathew (1978) 4 SCC 65. He drew attention to the relevant para of the said judgement: It is now well settled that strong suspicion, strange coincidences and grave doubts cannot take place of legal proof. To establish the charges against the respondents, it was, in our judgement, essential for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts as stated by the Adjudicating authority, by way of what has been stated in the Show Cause Notice, the ld. Special Counsel has submitted that, except for saying that investigations did not touch on purchase of raw materials and payments therefor, Nova did not come forward with any satisfactory explanation in respect of the facts stated in the Show Cause Notice, and the statements referred to therein. In this view of the matter, he submits that the present demand has been confirmed by the Adjudicating Authority for valid reasons and cannot be faulted. We have considered the submissions of both parties. We find that no evidence has been produced by the Revenue to show that Nova has effected sale of such huge quantities of (2,75,197.31 kgs) POY to GSL. There is no tangible evidence of GSL having actually produced all the DTY or Twisted Yarn from out of non-duty paid POY supplied by Nova. No transporters documents have been seized or produced by the Department to show transport and sale of such huge quantities of POY from Nova to GSL or, even for that matter, from GSL to the buyers of DTY produced by GSL. No evidence has been forthcoming of purchase of raw materials by Nova f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Oudh Sugar Mills case (supra). We are of the view that there is no tangible evidence produced by the department to establish that Nova has clandestinely manufactured and cleared POY on which the present demand has been made. We, therefore, set aside the demand of ₹ 56,52,945/- as being illegal and unjustified. II. The second demand of ₹ 3,93,20,685/- is based on Ashok Chiripal s diary, his statement and statements made by some of the employees of Nova. According to the Show Cause Notice, the diaries refer to production, captive consumption and clearance of Polyester Chips by Nova. Figures showed wide variations with statutory records. The chips are further used in the manufacture of POY by Nova. As regards this demand, the allegation is that Nova had suppressed the actual production, captive consumption and clearance of Polyester Chips and has not recorded for the entire production of Polyester Chips in the statutory records. Excess Polyester Chips have been captively consumed by Nova for further manufacture of POY which was further clandestinely cleared by them. According to the Revenue, the diaries were maintained by Ashok Chiripal in his own handwriting sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. Admissibility of a statement in evidence does not make it a confession. In this connection, he has referred to the decision of the Hon ble Supreme Court in Veera Ibrahim v State of Maharashtra (1976) 1 SCC 302, that Section 24 of the Evidence Act requires certain facts to be established. The statement in question should be a confession . Firstly, such confession should have been made by the accused. Other ingredients of S.24 are not relevant in the context of the present case. It is important to note that the statement in order to amount to confession must admit the offence or at any rate substantially all the facts which constitute the offence. Admission of incriminating facts howsoever great, is not by itself a confession. In the present case, the so-called confession has not been made by a person charged with any offence. Ashok Chiripal has not been charged with any offence which is in violation of the law in the present case. No show cause notice has been issued to him. The question of his statement being regarded as confession does not, therefore, arise, because confession, by its very nature, has to be made by a person charged with breach of law. In fact, at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries Ltd, a major supplier of the same, in respect of which proper records are maintained by them as well as Nova, and it was presumptuous for the Department even to contend that they were purchased from Reliance Industries Ltd. without any payment being recorded or in cash. Apparently, the investigating authorities never verified this from Reliance Industries Ltd and the impugned order records a mere finding that the statement that Nova purchases the raw materials from Reliance Industries Ltd is factually incorrect without giving any reason for arriving at the said finding. It was, therefore, the submission of the ld. Senior Advocate for Nova that the diaries and statements relied upon by the Revenue do not prove the case of clandestine manufacture and clearance of POY by Nova, which has to be established in accordance with law laid down by the Tribunal in the long line of decisions, referred to by him while dealing with the earlier demand. In reply to the submissions made on behalf of Nova, the ld. Senior Special Counsel for the Revenue filed written submissions on 30.7.13 and explained the same. The Diaries had been maintained by Ashok Chiripal, showing production and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions referred to and relied upon by the ld. Senior advocate for Nova have laid down the parameters for a charge of clandestine manufacture and clearance to be established, which have not been satisfied in the present case. We need to say nothing more. The present demand of ₹ 3,93,20,685/- is, therefore, unjustified and deserves to be set aside. Accordingly, we do so. III. The third demand of duty of ₹ 2,82,64,613/- is on Degraded Chips/Polymer Waste arising in the factory of Nova during the course of manufacture of POY. The allegations are essentially based on a report of the Regional Transport Officer (RTO) showing that the vehicles shown as transporting degraded chips are incapable of carrying the goods, that full addresses of buyers had not been given, and no payments have been made to transporters. It was alleged that no clearances of degraded Polyester Chips/Polymer Waste took place, and they were consumed captively to manufacture POY which was cleared clandestinely. Reliance has been placed upon the statement of Pankaj Patel, Accounts Assistant and H K Jha. Again Ashok Chiripal s statement has been relied upon to conclude that Nova has never cleared degraded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not substantiate the case of the revenue. The primary evidence which is required to establish clandestine removal is absent in the present case as explained in the decision of the Tribunal referred to earlier, is absent in the present case. It is further stated in the written submission filed by the ld. Senior Advocate that the RTOs Report relied upon by the Department dealt only with 9 consignments out of 130 (79090 gms out of 1396923 kgs) in which, as the Director of Nova pointed out in his statement, there could have been a human error, since the Vehicle Nos were written down as given by its Driver. It was also stated by Nova that details of identity of the customers and addresses were all given on the invoices. In fact, one of the customers had even been summoned by the investigating officers, who stated that he did not know Nova. Further, in the 9 consignments referred to by the RTO, addresses were indicated in the invoices. Though the vehicle numbers were wrong, the Department made no efforts to verify from the addressee customers as to whether they received the goods or not. There is no evidence of consumption of degraded chips or polymer waste for actual production of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LT 892, we have gone through the same. We agree with the submission of the ld. Senior Advocate for Nova that the said decision is distinguishable for the reason that the said decision was in a case where R.57G of the erstwhile Central Excise Rules had prescribed the particulars which an Invoice under Rule 52A should contain. Correct registration No. of the vehicle was a mandatory prescription. In the present case, no such mandatory provision has been pointed out to us. Further, the decision cited by Revenue confirmed the duty demand in respect of the invoices where the mandatory provision was found to been violated in as much as 99 vehicles were found to have been incapable of carrying the goods. In the present case, there were 9 vehicles out of 130 but the entire duty in respect of all the 130 vehicles has been confirmed. In any event, this being a case of clandestine clearance, evidence thereof cannot be the mere incapacity of 9 vehicles (inferred from only the Vehicle No. indicated) out of 130 to carry the goods. Corroborative evidence of actual manufacture of POY and clearance to identified person or places and of payments made are some of the required conditions, which are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the dealers. Enquiries with the Central Excise authorities, according to the Show Cause Notice, made it clear that they never verified duty-free input sent by Nova to EOUs under their charge because of CBEC Circular 88/98-Cus dated 2.12.1998. Certificates were issued on the basis of documents without any physical verification. In respect of EOUs located in the State of Gujarat, transportation of goods were, in some cases, made in incapable vehicles. Demands were, therefore, made jointly and severally from Nova and different EOUs. In the case of some EOUs, the Show Cause Notice alleged that they did not have the machinery to manufacture the goods from POY sold by Nova to them and export them. The Adjudicating Authority confirmed the demand holding, inter alia, that the Show Cause Notice, as alleged by Nova, was not defective in demanding duty jointly and severally from Nova and the EOUs. He relied upon the definition of the term manufacture under Section 2(f) of the Act and usage of the word person in Section 11A thereof. In all the cases of EOUs, the demands have been confirmed on Nova, on the ground that no POY was transported/received by the EOUs. Though the Show Caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utable to the EOUs insofar the manufacture of POY is concerned. Though the Adjudicating Authority has relied upon the definition of the term manufacture in Section 2(f) of the Act, the learned Senior Advocate submits that the Adjudicating Authority has misinterpreted the inclusive part in the definition of the term manufacturer appearing in the said Section 2(f) to mean that there could be more than one manufacturer in some cases. The learned Senior Advocate submits that the Adjudicating Authority has erred in coming to the above conclusion. Nova had relied on the decisions of this Tribunal in Famous Textiles v CCE, 2005 (190) ELT 361 and in the case of Shree Arvindh Steels, 2007 (216) ELT 232. Though they directly dealt with the issue, the Adjudicating Authority held that the ratio of the decisions is not strictly binding, since Famous Textiles decision was in a stay application under Section 35F of the Act and not a final order under Section 35 thereof. The decision in Arvindh Steels Ltd is the subject matter of appeal filed by the Department which, according to the Adjudicating Authority, is pending before the Hon ble High Court of Madras and is, therefore, not final in na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so been made by the EOUs to Nova by cheques/drafts. According to the Adjudicating Authority, physical verification of receipt of POY by the EOU was not necessary because of the Board Circular. The Delivery Challans are the conclusive document. The DC did not contain the signature of the authorized person or of the recipient. Therefore, there was no delivery at Malegaon/Dhulia. At the same time Delivery Challan is relied upon by the learned Adjudicating Authority to say the goods were delivered at or around Surat since the reverse side contained the names (not signatures) of Nova s brokers at Surat. From this it is presumed that the goods were sold in local market in or around Surat. There is no reference anywhere as to when they were sold in Surat, by which broker to which buyer. Significantly, enquiries were made with the brokers but it was found that no incriminating documents were available with them because the enquiries were twenty days after the search at Nova and the brokers anticipated the search of their premises. Strangely enough, the department did not consider it necessary to record any statement from the brokers whose names were found on the reverse of the Delivery Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are concerned, all the works relating to re-warehousing were based on documents. The EOUs were filing D-3 intimation, along with copies of AR-3As and invoices covering the consignments etc., with the Range. Since the physical supervision of EOUs had been dispensed with in terms of the CBEC circular No:88/98-cus dated 2.12.98, issued from F.No.473/9/98-LC, all re-warehousing procedures, other than those in respect of imported duty free consignments, were being monitored on the basis of records/documents maintained both by the EOUs as well as those maintained at the Range level. As and when the EOU were filing the D-3 intimation, the necessary records were called for with regard to in-bonding of such duty free goods, and based on the entries made therein and so far as it relates to other documents so submitted by the EOU to the Range under their signatures/certification, the Central Excise officer was signing the re-warehousing certificates on that basis viz., record/document basis only. At no time were the consignments of indigenous origin physically verified, as per the Boards Circular. Thereafter, re-warehousing certificates were being dispatched, either weekly or fortnightly b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, quantity used, finished goods produced etc. and maintenance or proper records is prescribed under the said circular and not dispensed with. Therefore, in the light of the CT-3s, AR-3As, D-3 and re-warehousing certificates having been issued in present case, by the parties, the ld. Senior Advocate submits a mere mention of the broker s name on the backside of Delivery Challans cannot have any significance or impact, particularly when D-3 intimation is a document which acknowledges the receipt of goods by the EOUs and is duly signed by the EOU. It was also the contention of the ld. Senior advocate that all EOU customers who were interrogated during the investigation have confirmed when their statements were recorded under Section 14 of the Act, that they have received the consignments of yarn from Nova which were warehoused in their premises and were used for further manufacturing purpose. The Adjudicating Authority has rejected these statements only on the ground that EOU customers had given details of the total quantity of yarn received and warehoused by them during the period but no specific information about the consignments received from Nova. This is a total mis-appreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... totally devoid of any factual basis and is legally untenable. On the merits of the present demand, the learned Special Counsel for the revenue has, as stated earlier, analyzed the evidence in a tabulated form in the written submission filed by him on 30.7.2013. He submitted that, in view of the reasons given in the tabulated form in column 4 under the head reasons, on the basis of complying with the principle of preponderance of probability and the weight of documentary and circumstantial evidence, it has been correctly held by the respondent that the allegation in respect of the seven EOUs (outside Gujarat) has been proved. He has also emphasized the fact that none of the aforesaid 7 EOUs participated in the adjudication proceedings. The learned Special Counsel has, while summing up his submissions, justified the order passed by the Adjudicating Authority in the present demand since, as per the report of the RTO, a number of vehicles shown to have been used to transport duty free goods under the CT-3 certificates were found to be incapable of carrying the same. It was corroborated by the statements of key persons of some of the EOUs. He further submitted that, in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved the case in favour of the revenue in the instant case. We have considered the submissions of both the parties on the merits of the demand. It is true as pointed out by the ld. Senior Advocate for Nova that the impugned order itself states that re-warehousing certificates for the entire quantity of yarn were received by the Central Excise Officers In-charge of all the EOU customers. These have also been shown as received in the in-bond register of the EOUs and payments have also been made by the EOUs to Nova by cheques/drafts. These have not been disputed by the ld. Special Counsel for the Revenue. CT-3 certificates, AR3As and D-3 declarations are all mandatory prescriptions under the Central Excise Rules in respect of transactions occurring between manufacturers and EOUs. The Adjudicating Authority, while passing the impugned order, has in the light of the statements of Inspectors in-charge of EOUs that physical supervision of receipt of goods by the EOUs had been dispensed with in terms of the CBEC Circular 88/98-Cus dated 2.12.98 in respect of clearance of goods made by the indigenous manufacturers as against importers, held that all the works relating to re-warehousing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he officer who have been posted on cost recovery basis or other officers assigned to the unit. (iii) Movement of non-duty paid goods:- The movement of goods without payment of duty has been allowed from the EOU to another EOU or to STP/ EHTP units and for exports. The officer incharge of the sending EOU and receiving units shall watch such movements as there are reports of misuse of this facility. The rewarehousing certificate on transfer of the goods from one EOU to another shall be obtained by post and shall be cross-checked occasionally with the Superintendent incharge of the next unit to see whether the goods have been actually received in the unit or not. In case of non-receipt of rewarehousing certificate and similarly proof of export from the proper officer, within 90/180 days, the duty shall be demanded from the sending unit immediately. (iv) Audit of the unit:- The presently sanctioned Cost Recovery Officers shall examine the records of the units and transactions undertaken by the unit at- least once in a month. The notification provides in regulation 11, that the Chief Commissioner may order special audit of the unit by a Cost Accountant (CA) nominated by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the records maintained for the purpose are proper and true, apparently because the manufacturers and EOUs enter into transactions which involve duty-free clearances under liberalized procedures. It is important to note that the impugned order takes into consideration the fact that, in compliance of the Board Circular, officers were not verifying physical receipt of goods in the EOUs. It would be incongruous to presume that the departmental officers did not carry out, in the present case, the periodic checks which have been prescribed under the latter part of the Board Circular. A Board Circular is binding in its entirety and not in parts. If their duty is to inspect the units on periodic basis to verify the correctness of the records, their failure to do so would amount to a non-compliance with the Circular. The relevancy of statutory records cannot, therefore be minimized by the department itself and pre-dominance be given to contractual documents like Delivery Challans issued by or between private parties. The reasoning of the Adjudicating Authority, that the Delivery Challan would outweigh the statutory records, is not sound. There is another vital fact, which is importan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that all transactions between Nova and EOUs were through dealers and the name of the dealer on the reverse of the Challan was to identify the dealer who was connected to the particular EOU. To conclude that the name of the dealer on the reverse of the challan is only to direct that the goods should be sold in or around Surat in the domestic market by the named dealer is too presumptuous and not backed by any evidence to support it. Secondly, if the intention of Nova was that the goods should be delivered to dealers at Surat, in such a case, at least in some of the Delivery Challans, it would be reasonable to expect that the dealer to whom the goods were delivered would have signed in token of having received the goods, whether it be for onward sale in Surat itself or on behalf of the EOU. We are not in a position to appreciate the inaction on the part of the Investigating Authority to get any clarification in this behalf from dealers, more so after having visited their premises and not found any incriminating materials. They have merely stated that no incriminating materials could be found because the dealers would have anticipated search of their premises since Nova had been sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justifiability of the present demand is the fact that, even though there had been statements of transporters that the goods were unloaded at Surat, there has not been, any evidence of any such unloading having taken place. Since there is not even an iota of evidence as to where in Surat the goods were unloaded or as to who took delivery of the same (this should have been known to the transporter) and to whom the goods had been sold, the present demand has no factual basis to sustain itself. The demand itself is been made in respect of 43,53,933.42Kgs as pointed out by Nova in their reply to Show Cause Notice, and covers the period (FY-2001-02 2002-03). No evidence of any sort (not even a single instance) showing actual sale of goods in the domestic market has come on record. The textile industry being one of the predominant industries in Surat, it is difficult for us to conceive that clandestine activities of sales of such large magnitude could have taken place without coming to the notice of the Central Excise authorities. This is not a case where goods sent to an EOU were found being sold in the domestic market. There is no evidence of any sale and there has been no identifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nching evidence of violation of the provisions of the Act and the Rules made thereunder. A conclusion cannot be arrived at on the basis of inferences which are, in turn, based on statements which are not supported by actual facts in existence or found. As far as the present demand is concerned, the allegations against Nova are based on some vehicles mentioned in the invoice being not capable of being used, the goods mentioned in the invoices not having been received by the EOUs, and the incapacity of some of the EOUs for utilizing the goods. From our discussion above, it would be clear that none of these grounds is substantiated by concrete or credible evidence. Mere reliance on the statements not corroborated by tangible evidence cannot be the basis for confirmation of a demand of high demand as in the present case. On the basis of the aforesaid findings, we are constrained to set aside the demand of ₹ 9,77,62,573/-. 43. The learned Senior Advocate has also in his written submission raised the ground of limitation against the 4 demands in the present case, and that the Show Cause Notice dated 30.6.06 was time barred since the extended period of limitation could not apply ..... X X X X Extracts X X X X X X X X Extracts X X X X
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